·         $8bn against the single currency

·         Political fear weakens sterling ahead of tomorrow’s Inflation Report

·         UK housing market data mixed.

·         Equity markets open up

All this and more is available on our blog. Click here  http://www.worldfirst.com/blog

The fears of a ‘hung’ parliament continued to linger over the pound yesterday. Sterling initially lost weight against both the euro and US dollar as well as all other major currencies before fighting back somewhat in the afternoon session.

As we have been saying for a couple of months; this volatility is only going to increase the closer that we get to the election.

The falls against the dollar have put us back to a level that a lot of analysts believe to be the long term purchasing power parity level (1.55) and therefore we should find some support for sterling around here. If that support gives however a GBPUSD starting 1.4 is definitely not out of the question.

The euro was also in the crosshairs yesterday as investors increased the level of ’short’ bets against the single currency to the largest level on record. A ‘short’ bet is one in which you make money should the price of the asset fall: about USD8bn is currently wagered on a weaker euro. The Spanish are, in particular, not happy about this and given the increase in concern over their sovereign debt in recent weeks Elena Salgado, Finance Minister, flew to London to meet bondholders.

GBP is unfortunately unlikely to take advantage of this due to the spectre of the Inflation Report on tomorrow’s horizon.  As far as data goes for today we have already had some mixed news from the UK’s housing market. RICS House Price Balance showed that while 32% of surveyors reported price rises in January as opposed to 30% in December, new instructions fell by 20%. This is probably as a result of the inclement weather we experienced in January more than anything.

Today’s other data includes German CPI (07.00), UK Visible Trade Balance (09.30) and US Wholesale Inventories (15.00)